JOINT CITY COUNCIL/
MINUTES
SEPTEMBER 6, 2007
The meeting was called to
order by Vice President Burke at 6:30 p.m.
Commissioner Lee appointed
City Council Clerk Connie Patterson as Acting Clerk for the
CITY COUNCIL MEMBERS PRESENT: Mr. Marshall, Mr. Fogt,
Mr. Burke, Mr. Reams, Mr. Gore
Excused: Ms. Sellers, Mr. Pleasant
OTHERS PRESENT: Steve Grassbaugh,
Brian Palmer, Rick Shortell, Deborah Groat, Steve Stolte, Ryan Horns
(Journal Tribune)
AGENDA:
POTENTIAL CREATION OF A MARYSVILLE-UNION COUNTY PORT
AUTHORITY
Mr. Eric Phillips explained a
situation with the Scotts Company. The
Scotts property is actually owned by the Ohio Department of Development. To make that deal happen, a large part of the
Scotts Company is owned by the State of
Also, recently the
Mr. Phillips distributed a
map showing where the Port Authorities are located in
Union County Economic
Development Action Plan recommends that we look for innovative ways to help out
business growth and development in our community in creating jobs. This is a tool that could be helpful to our
companies in the future to help create job growth and development.
Mr. Phillips introduced Steve
Grassbaugh from Peck Shaffer. If a decision is made to go with a Port
Authority, the CIC, as well as the Economic Development Partnership, have
agreed to pay the fees that will be required to set up this Port
Authority. There will be no cost to the
City or the County.
Mr. Phillips turned the
meeting over to Mr. Grassbaugh. He distributed copies of the Port Authority
Statutes that would apply to any Port Authority created by
Mr. Grassbaugh
created his first Port Authority in Zanesville/Muskingum County, which was
created over the back to retain one company in that town. It was a company that was threatening to
move. He came up with a financing plan
to retain that company, but a Port Authority was needed to do that. He has been involved in setting up six Port Authorities
to date.
A Port Authority is a political
subdivision created by other political subdivisions. It can be created by a City, a County or a Township
or any combination thereof. Once
created, other types of entities such as conservancy districts, etc. could join
if they wanted to.
The Port Authority is
governed by a board of directors, which is appointed by the entities that
create the Port Authority. When you have
a joint creation, you make an agreement as to how many each side is going to have
on the board.
The Chamber of Commerce feels
a joint City/County Port Authority is more beneficial and valuable. Mr. Grassbaugh
said the more successful Port Authorities have been the joint Port Authorities.
Some have a single activity; others have
a broad range of activities.
Directors serve four-year
terms staggered initially. The majority
of them have to live in or have their place of business in the jurisdiction of
the Port Authority. What is the
jurisdiction of Port Authority? It’s the
jurisdiction of the creating entities.
Port Authorities have the ability to do certain functions outside the
jurisdiction, such as the YMCA going to
Mr. Grassbaugh
said some Port Authorities have five members, some have 17. He does not recommend having 17, nor does he
recommend 3. He recommended between five
and seven members. He advised against
appointing elected officials or people who work for the governments that create
them because 1) they have a term of their own and 2) a lot of times the Port
Authority works in conjunction with the City and the County. This guideline could be put in the by-laws.
Powers are very broad for a
Port Authority. The Port Authorities
were initially created to run maritime and airports. They can finance projects. They can issue revenue bonds. Revenue bonds mean that the source of payment
is somebody else. It doesn’t count
against any one’s legal debt limit. It’s
a revenue bond issue. It is always
someone else’s credit. What you are
usually trying to do is take advantage of the Port to get tax exempt
financing. Port Authorities can do voted
debt issues. A Port Authority can levy a
tax , but only with the vote of the people and only up
to ½ of 1 mill and that’s of the debt issue for five years. These powers are granted under the
statute. The creating entities can restrict
the powers of the Port Authority it created.
It can be put in the by-laws that you don’t want them to go to the
ballot.
Mr. Gore asked about
default. Mr. Grassbaugh
explained that if Scotts defaults, there is probably a security device such as
a mortgage on their facility that they go against. They do not come to the Port Authority. It’s just a pass-through. The financing documents should state that the
Port Authority has no liability for the debt; the Port Authority is identified
by the private parties who are doing the debt, so there is really no risk to
the Port Authority.
As far as a tax to be levied,
it should be written that it be required that City Council and the
Eminent
Domain. The Port Authority has the power of eminent
domain. Some, who have created them,
have revoked that power. Others have
said you can only do eminent domain after first asking the creating body for
their permission before you go exercise eminent domain.
Once the agreement is done
and the Port is established, in order to amend that agreement, you need City
Council,
Mayor Kruse stated you are
creating tax-free bonds that allow for a lower interest rate to the borrower of
the money.
Controls must be written into
the by-laws.
Mr. Phillips said he’d like
to propose through the agreement that the Port Authority is associated with the
CIC staff, which is the Economic Development staff, to provide staffing.
You don’t want to create
something that you don’t have control over.
If you tie it to what you currently have, you don’t have a competing
interest out here doing its own thing.
Mr. Gore asked if you are
going to create a joint Port Authority, is there going to be opposition within
the community. Mr. Grassbaugh
responded probably not within the community.
Opposition may come from the other Port Authorities.
Port Authorities can’t give
abatements, TIF’s, JEDD’s, CRA’s or Enterprise Zones.
Mr. Burke asked how other
towns and townships fit in. Mr. Grassbaugh said if you wanted to you could go out and get
all those people to join up front, but that is a nightmare. The jurisdiction covers them all. If a township went out and created a Port
Authority before the County did, while their port is up and running, or if the
County or City jointly created one with county-wide jurisdiction, no one else
within the County could create another Port Authority.
Mr. Marshall asked about the
revenues generated by the Port. What is
that money used for? Mr. Grassbaugh said Port Authorities don’t have a lot of
money. The Board decides how to spend
the money.
Bonds are issued through an
investment banking firm or the bank.
Larger Port Authority sometimes has a financial adviser that they have
on staff and is paid out of the bond deal.
Almost everything that happens with one of these transactions is paid
out of the transaction.
The cost to set up a Port
Authority is the lawyer fee for actually doing it. The quote given to the CIC, if everyone is in
agreement, is about $1,500.
Mr. McCarthy asked about
annual cost. Mr. Grassbaugh
said it depends on how you set it up and what you are doing with it. For the smaller ports, the annual costs are
non-existent because they are basically the government entities that are supplying
the services for the Port.
Credit is issued on the basis
of the credit quality of the end user.
Mr. McCarthy asked what
capabilities does a Port Authority give that don’t already exist? Mr. Grassbaugh
responded that if the hospital came in tomorrow and wanted to borrow $9M and
wanted it to be that special category called Qualified Tax Exempt Bonds and
also often called bank qualified, where the IRS says to local banks, the intent
was for small issuers, they gave a special incentive to the bank to buy these
types of bonds. The entity issuing it,
cannot issue more than $10M of such funds.
In the County’s case, that $10M would not only be the hospital bonds,
501C bonds, but it’d be any bonds you issued for roads, highways, etc. There may be times you may not have the
capacity to do that deal to get them that special break on the tax rates that a
Port might be able to. That $10M is an
annual number and its new money.
The Port Authority doesn’t
impact the City or County debt ceiling.
The debt ceiling for cities and counties is based upon the taxes being
pledged to it.
Mr. Marshall asked if a Port
Authority and JEDD co-exist. Response
was the City and townships are the only ones who can create a JEDD. The County can be a party after you decide to
do it. They can work together or
separately.
Mayor Kruse asked how much
demand is there from developers for financing for sewer lines, trunk sewers and
water lines. Response was not
much. That demand is going to be the
same demand that they usually come to the City for. The City decides how to satisfy that
demand.
Mr. Lee asked that since this
is a political subdivision, is it held to the same accounting standards and does
it go through an audit by the State Auditor.
Mr. Grassbaugh said it’s audited annually just
like everyone else. They have a
competitive bidding statute. They have a
little flexibility on prevailing wage, but not a lot, but for the most part,
it’s the prevailing wage. Most of the
things that apply to you, apply to them.
Mr. Stolte
asked if employees of Port Authority are public employees. Response was yes.
Next step in the process
would be to convey to Mr. Phillips what you want to have done. Mr. Phillips would then ask Mr. Grassbaugh to draft an agreement, which would be circulated
among the City and the County, also to be reviewed by respective
attorneys. You then negotiate anything
there is to negotiate then pass an ordinance approving the agreement between
City and County, then the second ordinance would actually establish the
agreement. The County does the same
thing. Mr. Phillips noted a third piece
of legislation would be needed because the CIC is not an agent of the
City. Mr. Grassbaugh
said to never tie it permanently to anybody staffing it.
Mr. Fogt
would like the agreement to require approval of City Council and
Mayor Kruse feels this tool
should be made available to us whether we use it or not.
The Port Authority Board is a
non-paid board except for out-of-pocket expenses.
Is an audit required if there
is no activity or transactions under $200,000 like CIC; they don’t have to
audit every year. Mr. Grassbaugh didn’t know the answer to that. Mr. Lee wants an answer to that because
that’s probably the biggest on-going cost.
Consensus of the group is for
an agreement to be drafted for the group to review. If all agree, then ordinances will
follow. if
everyone agrees on a Port Authority, Mr. Phillips would like to have the
process completed by the end of the year.
Meeting adjourned at 7:50
p.m.